Covid-19 outbreak and the ongoing conflict between Russia and Ukraine have disrupted the global energy industry, causing challenges to the energy market, and impacting global oil, gas and coal supplies.
Malaysia is highly dependent on coal imports, and in March 2022, former Energy and Natural Resources minister, Datuk Seri Takiyuddin Hassan, revealed that the rising coal prices had increased the country’s electricity generation costs by 45%, with coal accounting for 59% of the power generation fuel source in the peninsula.
Diversifying energy sources or suppliers can help decrease reliance on a single source or a limited number of suppliers, ultimately enhancing energy security in Malaysia. Therefore, the volatility in terms of pricing, coupled with a shortage of supply, will create a knock-on effect on electricity tariffs.
IBR establishes long-term pricing while ICPT ensures that the tariff accurately reflects the actual costs of generating and supplying power. Adjustments are made every six months to account for fluctuations in fuel costs, which are incorporated as surcharges or rebates within the ICPT mechanism. Malaysian businesses currently are enjoying the benefits of having the second-lowest electricity prices in the Asean region. This positions them favourably when compared to their counterparts.